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Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year Vice versa for flattening.

If the 2 year note has a expected volatility of 2% per contract (or 4% for 2 contracts) and the 10 year has a expected volatility of 6%, how can i calculate the expected volatility of this spread?

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  • $\begingroup$ "how can i calculate the expected volatility of this spread?" - why not just look at the realised vol of the PNL for your given ratio? (which is not DV01-neutral). There are other ways to do it but this might be the simplest. $\endgroup$
    – user42108
    Sep 9 at 14:50
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Firstly you need to define what you mean by "expected volatility". Once you formulate formally the expected volatility, then I presume you will get the answer yourself.

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